Facts
- A newspaper publisher agreed to buy, and a paper manufacturer agreed to sell, 1,000 tons of newsprint per month from September 1919 through December 1920 (16,000 tons total), with specified quality, sizes, and monthly payment terms.
- The contract fixed prices for shipments in September 1919 ($3.73¾ per 100 pounds) and October–December 1919 ($4 per 100 pounds).
- For January–December 1920, the contract provided that the “price of the paper and length of terms for which such price shall apply” would be agreed by the parties 15 days before the prior price period expired, with the further limitation that the price could not exceed the price charged by a named third-party supplier to large consumers (subject to freight differentials).
- The parties performed without dispute for September–December 1919.
- Before the 1920 period, the seller asserted the contract was incomplete and refused to deliver further paper.
- The buyer demanded monthly deliveries during 1920 at the third-party supplier’s price (plus freight differentials) and renewed that demand throughout 1920; the seller refused, and the buyer sued for damages.
- The appellate court granted judgment on the pleadings for the buyer and certified whether the complaint stated a cause of action; the high court reviewed that certified question.
Issues
- Whether a supply contract is enforceable for a later period when it requires future agreement on both the price and the duration that price will govern.
- Whether a clause capping future prices by reference to a third party’s price supplies a definite, self-executing price term (and related time term) if the parties never reach the contemplated future agreement.
- Whether a court may supply missing essential terms (price and/or price period) when the contract expressly leaves those matters for future agreement.
Decision
- The court reversed the intermediate appellate court and answered the certified question in the negative, holding the complaint did not state a cause of action.
- The court held the contract was unenforceable as to the 1920 period because two essential elements—price and the duration of the price—were expressly reserved for future agreement and no agreement was reached.
- The third-party price reference functioned only as an upper limit; it did not fix the actual price or the length of time that price would apply.
- The court declined to imply a reasonable price or a reasonable price period because doing so would supply terms the parties had chosen not to settle.
Legal Principles
- A contract that leaves essential terms to future agreement is unenforceable when the parties provide no mechanism that determines those terms without further assent.
- When both the price and the duration of the price are left open, agreement on one is not sufficient to create an enforceable obligation without agreement on the other.
- A third-party price reference framed as a maximum (“in no event to be higher than”) limits what the parties may later agree to, but does not itself select the price or establish a binding price term.
- Courts will not rewrite a bargain by determining missing prices and time periods where the contract indicates the parties intended to negotiate those terms later.
Conclusion
Because the parties expressly postponed agreement on both the price for 1920 deliveries and the duration that price would control, and the third-party price clause supplied only a ceiling rather than an operative price-and-term formula, the alleged contract obligation for 1920 was too indefinite to enforce and the buyer’s complaint failed to state a cause of action.